Ukip threatens to sue over Cameron's 'racist' remark

The Conservative leader, David Cameron, was last night threatened with a libel action by the UK Independence party (Ukip) after accusing his rivals for rightwing Eurosceptic votes of being "fruitcakes and loonies - and closet racists mostly".

Allies of the Tory leader, who is determined to win back votes lost to Ukip at the last election, insisted there was no reason for him to apologise.

But Ukip, which has always been sensitive to charges that it is a tactical alternative to the British National party (BNP), angrily denied the "closet racist" accusation and claimed that Mr Cameron's remarks were a response to Ukip's move this week to publish names of the Tory party's secret financial backers.

Nigel Farage, leader of the Ukip group in the European parliament, said: "You cannot go round in the 21st century lobbing accusations of racism at a political party that got 2.7m votes 18 months ago.

"It is unacceptable. "We are big enough and ugly enough to put up with being called fruitcakes or loonies or gadflies. But this we will not put up with. We are talking to lawyers. There is this question: can a political party be libelled? To call someone racist in modern Britain is to accuse them of being criminal. We will not take this lying down."

Mr Cameron's remarks were made during a phone-in on the London radio station LBC four weeks before local elections where the two parties will fight for votes on the political right. The most conspicuous exception to Mr Cameron's move to the centre ground since December has been Europe where he is threatening to leave the main conservative bloc because it is too pro-European.

Mr Cameron declined to apologise yesterday: "I don't think I'm saying anything that hasn't been said before. Ukip have some issues - not least that their own founding member Dr [Alan] Sked left the party because he thought they had been infiltrated by the far right."

The Tory deputy chairman, Eric Pickles, MP for Brentwood and Ongar on the Essex fringes where Ukip polled 4.1% of the votes in 2005, reinforced his leader's defiance. "A number of organisations ... accuse Ukip of spreading hate and bigotry and they say it's not just anti-Europe, it's anti-black, it's anti-minority, anti-immigrants, anti-asylum seekers," he said.

Ukip demanded this week that the Electoral Commission release all details of gifts and loans made by anonymous donors to the Tory party before the last election. Mr Cameron is keen to make a clean breast of past funding issues, but wants to retain confidentiality for supporters who made it a condition of their cheque-writing.

The row is all the nastier because some Tories used to belong to Ukip and vice versa, including Mr Cameron's press officer, George Eustace, who was a past Ukip candidate. Roger Knapman, Ukip's leader and former Tory MP, said: "It was a sad, silly, stupid affair by ... Mr Cameron who is inexperienced as party leader and as a politician generally."

Mr Farage cited Ukip's recent expulsion of one of Silvio Berlusconi's coalition partners from its grouping in the European parliament. The Italian Northern League's four MEPs were thrown out after one of its ministers wore a T-shirt printed with cartoons satirising the prophet Muhammad. He said: "We thought the Italian Northern League were OK. But they have become Islamaphobic to an extent we find unsettling ... We adopt a firm line on immigration and asylum. But you haven't got to be racist to do that."